The Netherlands Aims to Strike a Balance Between Certainty for Taxpayers and Transparency to Fight Tax Evasion with a New Tax Ruling Policy

22 November 2018

The Netherlands Aims to Strike a Balance Between Certainty for Taxpayers and Transparency to Fight Tax Evasion with a New Tax Ruling Policy

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On, 22 November 2018, the Dutch Ministry of Finance published a letter outlining its envisaged new policy for rulings with an international character (international rulings), applicable as of 1 July 2019. The Ministry of Finance revised the current ruling practice based on the outcome of an investigation of approximately 4,500 rulings earlier this year, and informed the Dutch House of Representatives of the announced changes to the ruling policy through this letter.

The announced changes reflect the intention of the government to strike the right balance between maintaining business-friendly ruling practice while increasing the transparency required in the international fight against tax evasion. In its letter, the Ministry of Finance reiterates that the aim of the ruling practice is to provide certainty to businesses about the tax implications of their future business activities, and that these announced changes are intended to improve the quality of the Dutch tax authorities' ruling practice.

The announced changes concern the following three areas:

A. Transparency:

The tax authorities will publish anonymized summaries of each international ruling. This measure is based on Belgian practice.

The tax authorities will also publish an annual report concerning all international rulings, whereby it will also address the most important technical elements thereof.

Periodic investigations of the tax authorities' ruling practice will be undertaken by external experts to gain more insight into the quality of rulings.

B. Procedures:

A new team, called "College Internationale Fiscale Zekerheid" will be responsible for the central coordination of international rulings and will sign off on all international rulings as a second signatory (tweede handtekeningzetters). This measure is aimed at safeguarding quality and uniformity in the tax authorities' ruling practice.

C. Content:

The current substance requirements which need to be satisfied in the Netherlands to obtain an international ruling will be replaced with an "economic nexus" requirement. More details on the meaning of this requirement, together with examples, will be provided in an policy decree next year.

Rulings will not be issued if the sole purpose of the underlying business structure is international tax savings nor for transactions with entities established in non-cooperative tax jurisdictions (EU list) or a low-tax jurisdiction (Dutch list with jurisdictions with a corporate income tax rate below 9%).

Rulings will have a maximum period of five years. Only under exceptional circumstances, such as long-term commercial contracts, may the period of a ruling be extended to a maximum period of 10 years.

Rulings will have a predefined format to support processes and transparency in administration

The implementation of the announced changes to the ruling policy requires substantial preparation and organizational changes for the tax authorities, including the development of a new digital portal. The Ministry of Finance strives to implement the new ruling policy on 1 July 2019.

We will continue to monitor developments in this field and inform you of any relevant progress. If you have any questions regarding the possible impact on your Dutch tax ruling strategy, please do not hesitate to reach out to your contact at Baker McKenzie Amsterdam.

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